Roubini warns bond vigilantes may destabilize U.S. economy

Economist Nouriel Roubini spoke at the Raisina Dialogue 2025, warning about the influence of bond vigilantes on economic stability in the United States. He stated that financial markets have the power to challenge government policies, especially during fiscal deficits and rising protectionism. Roubini explained that bond vigilantes would react negatively to policies that increase inflation or national debt. This could lead to higher bond yields, which might hurt economic growth and the stock market. He emphasized that, although Donald Trump may control parts of the government, he cannot control market forces. Roubini discussed how the global economy has experienced backlash against hyper-globalization over the last 30 years. This includes responses to job losses and financial crises, with many nations now focusing on economic security rather than free trade. He highlighted trends like deglobalization and reshoring, driven by geopolitical tensions, particularly between the US and China. Regarding Trump’s possible return to the White House, Roubini noted that while some of his policies could boost economic growth, others might lead to negative outcomes. He praised Trump’s pro-business measures but raised concerns about protectionist policies that could harm the economy. He suggested that the Federal Reserve would act as a check on any reckless fiscal policies. On technology and global competition, Roubini pointed out that the US still leads in various technological fields. However, he warned that China faces significant economic challenges, predicting a slowdown in its growth. He raised concerns about China overproducing high-tech goods without adequate domestic demand. Despite these challenges, Roubini expressed optimism about the US economy. He believes technological advancements could lead to impressive economic growth in the coming years. Ultimately, he concluded that while markets and politics are intertwined, technology will play a crucial role in future economic success.